Capital Gain

A rise in the value of an asset (from its purchase price) that gives its owner a gain. The gain is unrealized until the asset is sold. A capital gain can be short term (the time between purchase and sale being under one year) or long term (the time between purchase and sale being over one year) and the owner will be taxed on it. A capital loss is incurred when the owner of an asset sells it for less than he bought it for.

Short-term capital gains are usually taxed at a high rate, to deter speculation and encourage long term investment.

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